Municipality of Makati vs. Court of Appeals

Public funds of a municipality are exempt from levy and execution absent a specific appropriation ordinance, but the expropriating municipality must promptly pay just compensation within a reasonable time, failing which mandamus may be availed to compel appropriation.

The Municipality of Makati initiated expropriation proceedings against Admiral Finance Creditors Consortium, Inc. and others over a parcel of land in Makati. Pursuant to Presidential Decree No. 42, the municipality opened a bank account with PNB to deposit funds for the expropriation. After the RTC fixed the just compensation and the decision became final, the private respondent sought a writ of execution to garnish the municipality's bank accounts to satisfy the unpaid balance.

On May 20, 1986, the Municipality of Makati filed an action for eminent domain against Admiral Finance Creditors Consortium, Inc. and others over a parcel of land registered under Arceli P. Jo. Attached to the complaint was a certification that a bank account had been opened with PNB Buendia Branch containing P417,510.00 pursuant to Presidential Decree No. 42. After due hearing, the RTC rendered a decision on June 4, 1987, fixing the appraised value of the property at P5,291,666.00 and ordering the municipality to pay this amount minus an advanced payment of P338,160.00 earlier released to the private respondent.

When the decision became final, the private respondent moved for a writ of execution. A notice of garnishment was served on the PNB Buendia Branch manager, but a "hold code" was placed on the municipality's account. The private respondent then moved to compel the bank to deliver the unpaid balance. The municipality sought to lift the garnishment, arguing for installment payments. Meanwhile, the municipality manifested that Philippine Savings Bank, Inc. (PSB) had consolidated ownership over the property via foreclosure. PSB and the private respondent entered into a compromise agreement to divide the compensation. On September 8, 1988, the RTC approved the compromise and ordered PNB to release P4,953,506.45 from the municipality's garnished account.

The municipality moved for reconsideration, arguing that its funds could not be garnished without an appropriation ordinance, citing Republic vs. Palacio. The RTC denied the motion, holding that the specific account was opened for the expropriation and thus the exemption doctrine did not apply. The RTC also held the PNB manager in contempt for refusing to release the funds. The municipality and the bank manager filed separate petitions for certiorari with the Court of Appeals, which dismissed both. On November 20, 1989, the Supreme Court issued a temporary restraining order. Before the Supreme Court, the municipality belatedly alleged it had two PNB accounts: one specifically for the expropriation (with a balance of P99,743.94) and another for general municipal obligations (with a balance of P170,098,421.72). The municipality conceded that the specific expropriation account could be garnished but argued the general municipal funds were exempt.

• Exemption of Public Funds: Petitioner contended that its general municipal funds deposited in PNB Account No. S/A 263-530850-7 were public funds earmarked for statutory obligations and thus exempt from execution absent a proper appropriation ordinance required by law.
• Concession on Specific Account: Petitioner posed no objection to the garnishment of the funds in PNB Account No. S/A 265-537154-3, amounting to P99,743.94, as this was specifically opened for the expropriation proceedings.

• Garnishment of Public Funds: Whether the general public funds of a municipality deposited in a bank account for statutory obligations can be garnished to satisfy a final money judgment absent a specific appropriation ordinance.
• Payment of Just Compensation: Whether the municipality can be ordered to immediately pay the balance of just compensation despite the exemption of its general funds from garnishment.

• Garnishment of Public Funds: No. Public funds are not subject to levy and execution absent a specific appropriation ordinance, hence the RTC order directing the release of the general municipal funds was set aside.
• Payment of Just Compensation: Yes. The municipality was ordered to immediately pay the balance of P4,953,506.45 within 60 days, as just compensation requires prompt payment and the municipality had enjoyed the property for three years without full payment.

• Garnishment of Public Funds: The funds in the second PNB account are public funds of the municipal government. Well-settled is the rule that public funds are not subject to levy and execution unless provided by statute. Municipal revenues intended for governmental activities are exempt from execution. Absent a showing that the municipal council passed an ordinance appropriating funds for the balance due, no levy may be validly effected on the general public funds. However, the claimant may avail of mandamus to compel the enactment of the necessary appropriation ordinance.
• Payment of Just Compensation: The validity of the RTC decision fixing just compensation was not disputed and no appeal was taken. The municipality had possessed and used the property for three years without paying full compensation. Just compensation means not only the correct determination of the amount but also payment within a reasonable time. Without prompt payment, compensation cannot be considered "just." The State's power of eminent domain must be exercised within the bounds of fair play, and the municipality had more than reasonable time to pay.

• Public Funds Exemption Doctrine — Public funds are not subject to levy and execution unless otherwise provided by statute. Municipal revenues derived from taxes, licenses, and market fees, intended for financing governmental activities, are exempt from execution. The Court applied this by setting aside the RTC's order to release funds from the municipality's general account, as no appropriation ordinance had been passed.
• Prompt Payment as an Element of Just Compensation — Just compensation means not only the correct determination of the amount to be paid but also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just." The Court applied this by ordering the municipality to pay the balance within 60 days, given its three-year possession and use of the property without full payment.
• Remedy of Mandamus for Unpaid Judgments — Where a municipality fails or refuses, without justifiable reason, to effect payment of a final money judgment rendered against it, the claimant may avail of the remedy of mandamus to compel the enactment and approval of the necessary appropriation ordinance and the corresponding disbursement of municipal funds.

• "well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for by statute" — This passage states the controlling rule on the exemption of public funds from garnishment, which served as the basis for setting aside the RTC order.
• "[j]ust compensation means not only the correct determination of the amount to be paid to the owner of the land but also the payment of the land within a reasonable time from its taking." — This defines the concept of just compensation in the context of eminent domain, emphasizing that promptness of payment is as crucial as the correctness of the amount.

• Republic of the Philippines vs. Palacio, 23 SCRA 899 — Cited as the controlling precedent for the doctrine that public funds are exempt from garnishment or execution without proper appropriation.
• The Commissioner of Public Highways vs. San Diego, 31 SCRA 616 — Followed to support the rule that public funds are not subject to levy and execution unless provided by statute.
• Cosculluela vs. The Honorable Court of Appeals, 164 SCRA 393 — Cited to support the principle that just compensation requires prompt payment within a reasonable time.

• Presidential Decree No. 42 — Cited as the legal basis for the municipality opening a bank account specifically for the expropriation proceedings.

Fernan, C.J., Gutierrez, Jr., Feliciano, and Bidin, JJ.